Sally Hall v. Rag-O-Rama, LLC
20-6090
| 6th Cir. | Nov 2, 2021Background
- Sally Hall left a prior employer to become Rag-O-Rama’s area manager on June 13, 2016, after signing a written "Communication Form" and reviewing the Employee Handbook.
- The Communication Form contained a poorly drafted noncompete paragraph stating managers were "obligating . . . to one full year of employment," and the Handbook expressly stated employees are employed at-will.
- Whitener (owner/manager) allegedly made oral promises to Hall — a company car, $5,000 payment for prior work, and possible ownership/franchise opportunity — which were not included in the written contract.
- Rag-O-Rama placed Hall on a final improvement plan and fired her on January 10, 2017 for performance issues; Hall sued for breach of contract and fraudulent inducement, among other claims.
- The district court granted summary judgment for Rag-O-Rama on breach and fraud (holding the written contract was unambiguous and Hall could not reasonably rely on conflicting oral promises) but denied the company’s request for attorney’s fees as sanctions.
- The Sixth Circuit affirmed the summary judgment and the denial of fees, concluding the Communication Form did not guarantee one year of employment and Hall’s reliance on oral promises was unreasonable as a matter of law.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the Communication Form guaranteed a one-year employment term | The noncompete clause unambiguously guarantees Hall one year of employment | The clause, though poorly drafted, imposes an obligation on managers to work one year, not an obligation on the employer | The clause is unambiguous as to meaning: it obligates managers, not Rag-O-Rama; employment remained at-will (summary judgment for defendant) |
| Whether Whitener’s oral promises (car, $5k, ownership) fraudulently induced Hall to quit prior job | Hall reasonably relied on Whitener’s promises in deciding to take the job | Reliance was unreasonable because the written contract carefully enumerated benefits and did not include those promises | Reliance unreasonable as a matter of law because the oral promises conflicted with the written agreement; fraud claim fails |
| Whether parol evidence (oral promises) can modify at-will status despite the written contract | Hammond and similar cases permit oral modifications of at-will status | The written Communication Form and Handbook unambiguously preserve at-will status and bar contradictory oral promises | Hammond is distinguishable; parol evidence barred where a clear written contract retains at-will employment |
| Whether the district court abused its discretion by denying Rag-O-Rama attorney’s fees/sanctions | Rag-O-Rama: Hall’s claims were frivolous and warranted sanctions | Hall pursued claims in good faith; the district court found no bad faith and the claims were not frivolous enough to sanction | Denial of sanctions affirmed — no abuse of discretion; claims, while unsuccessful, were not frivolous or filed in bad faith |
Key Cases Cited
- Bisig v. Time Warner Cable, Inc., 940 F.3d 205 (6th Cir. 2019) (summary-judgment standard; accept plaintiff’s factual version at that stage)
- Superior Steel, Inc. v. Ascent at Roebling's Bridge, LLC, 540 S.W.3d 770 (Ky. 2017) (unambiguous contract language controls; parol evidence excluded)
- New Life Cleaners v. Tuttle, 292 S.W.3d 318 (Ky. Ct. App. 2009) (parol-evidence rule in Kentucky contract interpretation)
- Wymer v. JH Props., Inc., 50 S.W.3d 195 (Ky. 2001) (presumption of at-will employment)
- Shah v. Am. Synthetic Rubber Corp., 655 S.W.2d 489 (Ky. 1983) (parties may contract around at-will rule but must clearly state intent)
- Flegles, Inc. v. TruServ Corp., 289 S.W.3d 544 (Ky. 2009) (narrow exception for fraudulent future promises; recipients must use common sense)
- RadioShack Corp. v. ComSmart, Inc., 222 S.W.3d 256 (Ky. Ct. App. 2007) (promises of future performance ordinarily not actionable as fraud)
- Rivermont Inn, Inc. v. Bass Hotels & Resorts, Inc., 113 S.W.3d 636 (Ky. Ct. App. 2003) (oral promises conflicting with written contract preclude reasonable reliance)
- Goodyear Tire & Rubber Co. v. Haeger, 137 S. Ct. 1178 (2017) (limits on awarding attorney’s fees under court’s inherent power; bad-faith requirement)